Author Archives: Evil Speculator

Introductory Remarks by PT

Below we present a recent article by the Mole discussing a number of technical statistics on the behavior of AAPL over time. Since the company has the largest market cap in the US stock market (~ USD 850 billion – a valuation that exceeds that of entire industries), it is the biggest component of capitalization-weighted big cap indexes and the ETFs based on them. It is also a component of the price-weighted DJIA. It is fair to say that the performance of AAPL is not unimportant for the broad market.

AAPL, weekly over the past 5 years. The stock has recently hit new highs. In a way this is quite funny, as it happens just as the company enters maturity; its revenue and earnings growth rates are fated to enter a long term phase of decline from here on out no matter what – this is a mathematical certainty. Many of the darlings of the late 1990s tech bubble eventually faced a similar problem (in early 2000 we patiently explained to a fellow investor why Cisco could not possibly maintain an annual revenue growth rate of 50% for another decade, or even for another few years). This is beside the fact that the company hasn’t introduced any particularly successful innovative products since the iPhone, which remains its biggest revenue generator by far (the times when new generations of the iPhone offered genuine advances in terms of design and technological capability are but a distant memory as well; these days updated versions at best tend to offer a handful of tweaks). We don’t want to detract from the company’s undeniable entrepreneurial success and well-deserved reputation for quality, reliability and cool design. We merely question its current stock market valuation and the sense of timing of those buying the stock here and now. Admittedly, given the market’s effortless climb up the rungs of the greater fools ladder hitherto, recent buyers may well make a profit. We only know that someone will eventually end up holding the proverbial bag. A side note: the blue dotted lines on the chart serve to highlight a typical momentum divergence between RSI and price. The divergence is even more glaring on a daily chart. Sometimes such divergences turn out not to mean anything, but more often than not they are a short term warning sign worth heeding – click to enlarge.

Lumpy but Robust

[ed note: thisarticle has originally appeared at the Evil Speculator and was written by trader and ES contributor Scott. We provide a link to Scott’s past articles below this post for readers who want to get more familiar with his ideas and/or any unusual terminology used in this article]

One continual theme in my trading is that every time I think I have it figured out, I get punched in the face by an unexpected problem. The tendency is to go more complicated, but often the solution is a degree of acceptance with respect to the nature of the game. Sometimes my edges work, sometimes they don’t. Sometimes they stop working for long periods of six months or more.

Awesome Forecasts and the Unknowable Future

Back in late 2013 I wrote a piece on human nature which was in part inspired by the bullish exuberance exhibited by a MarketWatch article predicting the DJIA at 20,000 in the near term future. Yesterday afternoon, a bit over three years later, that prediction actually became reality and I’m sure the author of that article as well as many other like minded traders popped some champagne in celebration of their awesome ability to predict the future.

Holding Pattern

When it comes to interesting charts or marginally promising setups I’m pretty much scraping the bottom of the barrel right now. Not surprising really, given that the few remaining market participants (bots! cough cough) are firmly set in a holding pattern after a one year sideways churn and an impending Presidential election on November 8th which is thought to have the potential to be the catalyst for changes in the financial arena. I for one hold very little hopes on that end, no matter which of the two candidates will be sworn in come January.

Flash-Crashed

Earlier this morning the British Pound suddenly found itself on the receiving end of a 6% flash crash during Asian trading hours. Some of the losses have been recouped since then, but that will be of little consolation to anyone who may have been long the GBP overnight.

A Rare Apparition

An old friend suddenly showed up out of the blue yesterday and I’m not talking about a contributor who had washed out and, after years of ‘working for the man’, decided to return for another whack at beating the market. Instead I am delighted to report that I am looking at a bona fide confirmed VIX sell signal which we haven’t seen for ages here.

Hello, old friend. Professor X and Magneto staring each other down in the plastic prison.

Fractal Geometry of the Markets

You probably wouldn’t know it but I have actually been extremely busy over the past few months resurrecting a previous creation of mine. It all started about two years ago, in early summer of 2014, when I wound up diving head first into more advanced topics such as machine learning, artificial neural networks, support vector machines (SVMs), as well as fractal geometry of financial time series.

It is hot and it is humid over here in Valencia. You want to know how hot? The other day a poodle’s tail caught fire just waiting in the sun. The more frantically he was wiggling his tail the brighter it burned.

A time for quiet contemplation of the bright blue sea… while next door, the poodle burns!

Net Lines

It’s that dreaded day after Independence Day. The weather is gorgeous and I don’t really feel like trading either. The thought of just phoning it in had occurred to me, but as the new month just rolled over I thought I may as well take another peek at our monthly charts. Which uncovered quite some interesting perspectives that I’m eager to share.

But no worries – we’re keeping it light and easy today. Consider this a purist’s approach to market analysis as we’re going to ignore everything but Net-Lines.

A Glorious Day

What a glorious day for Britain and anyone among you who continues to believe in the ideas of liberty, freedom, and sovereign democratic rule. The British people have cast their vote and I have never ever felt so relieved about having been wrong. Against all expectations, the leave camp somehow managed to push the referendum across the center line, with 51.9% of voters counted electing to leave the European Union.

Do or Die

I think I speak for everyone involved if I say that it’s way past high time for this market to either breach the wall ahead of SPX 2150 or finally accept defeat and relieve itself to the downside. It’s become a war of attrition at this point as we have been suffering through this deadlock of a market for more than a year. And may I say – it’s getting not just boring but increasingly annoying.

Most read in the last 20 days:

A Recurring Pattern
When the gold price recently spiked up to approach the resistance area even Aunt Hilda, Freddy the town drunk, and his blind dog know about by now, a recurring pattern played out. The move toward resistance fanned excitement among gold bugs (which was conspicuously lacking previously). This proved immediately self-defeating - prices pulled back right away, as they have done almost every time when the slightest bit of enthusiasm emerged in the sector in recent...

Special Guest Trey Reik and Board Member Jim Rickards Discuss Fed Policy
On occasion of its Q1 meeting in late January, the Incrementum Advisory Board was joined by special guest Trey Reik, the lead portfolio manager of the Sprott Institutional Gold & Precious Metal Strategy at Sprott USA since 2015 [ed note: as always, a PDF of the complete transcript can be downloaded further below].
Trey Reik of Sprott USA.
Also at the meeting, Jim Rickards, who is inter...

Europe at an Important Juncture
European economic fundamentals have deteriorated rather noticeably over the past year - essentially ever since the German DAX Index topped out in January 2018. Now, European stock markets have reached an important juncture from a technical perspective. Consider the charts of the Euro-Stoxx 50 Index and the DAX shown below:
The Euro-Stoxx 50 Index already peaked in early November 2017, the DAX followed suit in January 2018 – such divergent peaks...

Riding the Tailwinds of Fiat Money Inflation to Fame and Fortune
Warren Buffett bought his first shares of stock when he was 11 years old. He saved up $114.75 and “went all in,” purchasing three shares of Cities Service preferred stock. The day was March 11, 1942 – nearly 77 years ago. Buffett recently reminisced about this purchase in his annual letter to shareholders:
“I had become a capitalist, and it felt good.”
The Oracle of Omaha – he was...

Not the Brightest Tool in the Shed
Shane Anthony Mele stumbled off the straight and narrow path many years ago. One bad decision here. Another there. And he was neck deep in the smelly stuff.
These missteps compounded over the years and also magnified his natural shortcomings. Namely, that he’s a thief and – to be polite – a moron.
Over-educated he ain't: Shane Anthony Mele, whose expressive mug was captured by a Florida police photographer first in...

Rise of the Zombies - Precious Metals Supply and Demand
Last week, the prices of gold and silver fell $35 and ¢70, respectively. But what does that mean (other than woe unto anyone who owned silver futures with leverage)?
The S&P 500 index and the euro was up a bit, though the yuan was flat and copper was down. Most notably, the spread between Treasury and junk yields fell. If the central banks can lower the risk of default premium, they can make everything unicorns and...

Defending 3,800 and a Swing Trade Play
For one week, bulls have been defending the 3,800 USD value area with success. But on March 4th they had to give way to the constant pressure. Prices fell quickly to the 3,700 USD level. These extended times of range bound trading are typical for Bitcoin Bottom Building in sideways ranges.
This 60 minute chart of Bitcoin shows (represented by the yellow candlestick wicks) how the bulls defended 3,800 USD :
BTCUSDT 60 minute chart...

The Week Ends with a Surprise
The weekly closing prices of the precious metals were up +$5 and +¢11. But this does not tell the full story of the trading action. Prices were dropping until Friday. More precisely, Friday 8am in New York, or 1pm in London.
Gold and silver - back in demand on Friday... [PT]
At that moment, a light cabal conspiring to jack the price struck traders began buying. The end result was the prices, especially of silver, rose on the day...

In 6 of 10 Countries a Single Day Outperforms the Entire Week!
In the Seasonal Insights issue of 13 February 2019 I presented a study illustrating the power of intraweek effects. The article was entitled “S&P 500 Index: A Single Day Beats the Entire Week!” The result of the study: if one had been invested exclusively during a single day of the week since 2000 – namely on Tuesday – one would have outperformed a buy and hold strategy, beating the broad market.
Moreover,...

The new IGWT report for 2019 will be published at the end of May...
...and for the first time a Mandarin version will be released as well.
Gold compared to other financial assets – from the IGWT chart book
In the meantime, our friends at Incrementum have decided to release a comprehensive chart book in advance of the report. The chart book contains updates of the most important charts from the 2018 IGWT report, as well as a preview of charts that will appear...